Critical Analysis Of 'Half A Defence Of Positive Accounting Research' Essay.

Positive accounting theory in accounting researches

Questions:

1.How positive accounting research has proved successful in developing an understanding of human behavior in accounting settings?

2.What are the common deficiencies present in PAT (Positive Accounting theory) that limits its applicability in wider accounting researches?

3.Does accounting researchers need to develop better models in comparison to PAT for achieving better outcomes from accounting researches?

This paper provides a critical analysis of the research article ‘Half a Defence of Positive Accounting Research’ written by Paul v Dunmore. The paper identifies and summarizes the key points illustrated in the article in relation to the positive accounting research. The aim of this critique is to develop an understanding of the arguments presented in the paper in reference to the use of positive accounting theory in explaining human behavior in accounting field. The research article is about discussing the challenges associated with the use of positive theory in maintaining the scientific nature of accounting settings (Dunmore, 2009). In this context, this paper discusses the future scope of positivist research program in accounting settings through analyzing the arguments presented in the research article. The paper presents a brief summary of the article, identifies its research question, discusses its theoretical framework and illustrates the significance and limitations of the article.

The given research article has provided an explanation regarding positive accounting in wider sense and depicted its importance in accounting researches. The theory of positive accounting, advocated by Watts and Zimmerman, was largely claimed to be basedprinciples of natural science. The theory was thus adopted by accounting researchers largely to resolve accounting issues by conducting scientific accounting researchers. The theory was utilized by business organizations in order to select the most appropriate accounting practices and concepts for resolving accounting problems. The accounting problems are resolved through the help of conducting quantitative accounting researches through incorporating the concepts of positive accounting theory (Bovens, Goodin and Schillemans, 2014). The positive approach to accounting researches is being analyzed in the overall research article through exploring its applicability in conducting successfully scientific researches. The positive accounting research is being regarded as a part of scientific researches as they seek to explain the cause and effect relationships of particular accounting phenomena. As such the theory finds extensive application in large and complex organizations to demonstrate the cause of human behavior in a particular situation (Chambers and Dean, 2013). The deficiencies of positive accounting research has been emphasized by the author in the given research article (Dunmore, 2009).

The research article has regarded that the concept of positive research is much wider in comparison to the theoretical model of positive accounting theory. The concepts proposed by theoretical model of positive accounting can be used only to develop an understanding of the rational human behavior in accounting field. On the contrary, accounting field also seeks to gain an understanding of causes of non-rational human behavior such as explanation regarding use of discretion by manager in performance-evaluation systems or the cause of judgments taken by audit experts. Thus, it can be stated that the positive research program is much wider than the concepts advocated by the positive accounting theory (Wolk et al., 2012). Therefore, accounting researches does not only seek to explain the rational human behavior in accounting but also aim to provide an understanding of the non-rational aspects of human psychology. Also, the author has stated in the research article that the use of positive approach in accounting field only helps in exploring the causes but is not suitable for developing an understanding of the meaning of accounting concepts (Abdel-Kader, 2011). The research article has also illustrated the use of Popper’s falsification criterion in explaining the nature of scientific researches. The best current understanding of acceptance or rejection of theories on scientific basis has been provided by Popper (Dunmore, 2009).

Deficiencies of Positive Accounting Theory

Further, the author has discussed about the deficiencies existing in both qualitative and quantitative researches through adopting the concepts of positive accounting theory. The weakness present in the logic of statistics hypothesis testing used in quantitative positive accounting research is also discussed in detail in the research article. The author has tried to provide an explanation of the application of positive theory to accounting and suggested the areas of improvement in positive accounting researches. The research study has also emphasized that accounting researchers should focus on adopting other theoretical models for carrying out successfully scientific accounting researches. The author has concluded from the overall discussion held in the research article that positive accounting research is not able to achieve its scientific aims and objectives. The deficiencies highlighted by the author present in positive accounting research will draw attention of accountants in order to develop more improved formal theory based on analytical research to be used in resolving accounting problems (Dunmore, 2009).

The author has analyzed and examined the views of different authors in relation to the significance of positive approach in accounting settings. This has developed a theoretical framework of the research article based on which the author has presented a valid answer for the research questions. The positive approach to accounting has been developed in order to provide a proper explanation to the reality of accounting concepts. The theory since its origination has been regarded in contrast with normative accounting theories used in accounting field. The normative accounting theory guides the decisions of accountant based on theoretical accounting principles (Deegan, 2014). On the contrary, as analyzed from the research article positive accounting theory examines the real life events and thus helps businesses to implement an appropriate method for addressing the accounting issues. Thus, the theory of positive accounting tends to examine the economic impacts of accounting choices made by the firm managers. It tends to predict the accounting of business transactions by business organizations in future context. The theory developed by Watts and Zimmerman was regarded to be practical and based on explaining the reality behind the accounting transactions. However, the theoretical framework of the research article has depicted various shortcomings in the theory and thus regarded it to be not appropriate for achieving scientific objectives of accounting research. The theory is not able to explain the cause and effect relationships in accounting settings in quantitative terms (Ghnabari et al., 2016).

The best understanding of the theory on scientific basis has been provided by Popper. The theoretical framework of the research study has also incorporated the use of Popper’s falsification criterion in order to justify the scientific basis of positive accounting theory. As per popper’s criterion, the procedure of developing a scientific theory consists of following sequence of steps. The first step involves developing preliminary ideas and establishing a formal theory based on analytical research. The testable predictions are obtained from the theory through gathering the empirical evidences related to the theory. The predictions obtained should be defined in quantitative terms as they can be tested through the adoption of falsification criterion. The theory is rejected to be based on scientific nature if the quantitative predictions are falsified. The falsification criterion of Popper has been used largely for analyzing the scientific nature of large number of theories (Dunmore, 2009).

Popper's falsification criterion in accounting researches

The research article has utilized the Popper’s criterion in analyzing the scientific nature of both qualitative and quantitative accounting research. The author has proposed that although scientific researchers are considered to be quantitative there are number of science theories that are qualitative also for example, theory of evolution proposed by Darwin. Thus, as per the research study the positive and quantitative accounting researches are different and thus there also exist researches in positive accounting that are qualitative. The qualitative positive research is undertaken in accounting for collecting information about particular accounting phenomena. The qualitative positive research also helps in testing the quantitative predictions of scientific theories as described in Popper’s criterion. However, the accounting researches only uses qualitative positive research only to develop an understanding of the accounting phenomena and the theoretical framework are not used to obtain assertions into the reality of accounting practices. On the other hand, quantitative positive researches though able to explain the reality of accounting practices suffers from the drawback of undue reliance on logic of hypothesis testing. The author has identified and proposed the weakness associated with the logic of statistical hypothesis testing is that it does not incorporate the concept of measuring the outcome obtained (Dunmore, 2009). The accounting data is always subjected to measurement error and thus quantitative researches should also emphasize on adopting the theories that are based on mathematic forms for appropriate measuring of accounting data (Mattessich, 2013). Thus, the author after examining the ontology and epistemology of positive research has concluded that current practice of positive research in accounting has greater scope of improvement through the incorporation of better theoretical models than PAT (Dunmore, 2009).

The research article in context has high relevance for identifying the scope of improvement present in quantitative accounting research. The author through the overall research study has clearly identified and stated the current deficiencies existing in the PAT model used in accounting researches. The research study will prove to be highly beneficial for businesses as it recommend the implementation of better theoretical models for explaining the reality of accounting transactions. However, the research study is also associated with the limitation of only adopting the use of quantitative research methodology in achieving the aims of the study. The research study has only analyzed and examined the qualitative data related with the research topic and has not applied the quantitative research methodology in resolving research questions. The author has only proposed theoretical conclusions that are drawn from the theoretical framework of the research article (Dunmore, 2009).

The theoretical framework of the research article is based only on the work of previous researchers and thus the research study lacks objectivity. The research study is highly subjective in nature and thus suffers from limitation of lacking credibility and authenticity. The author has not proposed any primary finding that helps to explore the research topic from a new perspective. The author, instead, has only focused on the work of previous researchers related to the research topic. The limitation of only using qualitative data also has impacted the significance of the research article to be used in future researches (Chatfield and Vangermeersch, 2014). The research lacks objectivity and thus its potential use in future context by other accounting researchers is impacted largely. The research study will find only limited use in future accounting researches carried out in relation of examining the use of PAT in conducting scientific accounting researches (Dunmore, 2009).

Conclusion

The research article has recommended the use of better theoretical models in accountings to successfully achieve the aims and objectives of scientific accounting researches.  The operation of a successful quantitative accounting research requires development in PAT model by incorporating the concepts of measurement also rather than relying only on hypothesis testing. The theoretical models need to be developed on the basis of conducting analytical researches so that its concepts are well-defined to be used in scientific accounting researches. The theoretical models developed should be tested through the use of popper’s falsification criterion so that their scientific nature is proved. The concepts need to be fully operationalized and should be derived from mathematical forms so that they can easily help in measurement of accounting data. Thus, all these considerations will help in development of better model that can be used in accountings settings as compared to PAT.

References

Abdel-Kader, M. G. 2011. Review of Management Accounting Research. Springer.

Bovens, M., Goodin, R. E., and Schillemans, T. 2014. The Oxford Handbook of Public Accountability. OUP Oxford.

Chambers, R. J., and Dean, G. W. 2013. Chambers on Accounting: Logic, Law and Ethics. Routledge.

Chatfield, M. and Vangermeersch, R. 2014. The History of Accounting (RLE Accounting): An International Encylopedia. Routledge.

Deegan, C. 2014. Financial Accounting Theory. McGraw-Hill Education Australia.

Dunmore, P.V. 2009. Half a Defence of Positive Accounting Research.

Ghnabari, M. et al. 2016. PAT (Positive Accounting Theory) and Natural Science. International Research Journal of Applied and Basic Sciences 10(2), pp. 177-182.

Mattessich, R. 2013. Reality and Accounting: Ontological Explorations in the Economic and Social Sciences. Routledge.

Wolk, H. I., et al. 2012. Accounting Theory: Conceptual Issues in a Political and Economic Environment. SAGE.